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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 5188 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  2d Session
                                S. 5188

     To amend the Internal Revenue Code of 1986 to incentivize the 
divestiture of certain securities connected to the People's Republic of 
                                 China.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           September 25, 2024

   Mr. Rubio introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
     To amend the Internal Revenue Code of 1986 to incentivize the 
divestiture of certain securities connected to the People's Republic of 
                                 China.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Patriotic Investment Act''.

SEC. 2. INCENTIVES TO DIVEST DISQUALIFIED PRC SECURITIES.

    (a) Treatment as Ordinary Gain.--Part IV of subchapter P of chapter 
1 of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 1261. GAIN FROM DISPOSITION OF DISQUALIFIED PRC SECURITIES.

    ``(a) In General.--Any gain on the disposition of any disqualified 
PRC security shall be treated as ordinary income and shall be 
recognized notwithstanding any other provision of this subtitle.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Disqualified prc security.--The term `disqualified 
        PRC security' means any specified interest held directly or 
        indirectly with respect to any of the following:
                    ``(A) The Government of the People's Republic of 
                China or any other governmental entity based in the 
                People's Republic of China.
                    ``(B) The Chinese Communist Party or any 
                subdivision or affiliate thereof.
                    ``(C) A person who is a citizen, national, or 
                resident of the People's Republic of China, provided 
                that such person is not an individual who is--
                            ``(i) a citizen or lawful permanent 
                        resident of the United States, or
                            ``(ii) domiciled in Taiwan possessing a 
                        valid identification card or number issued by 
                        the government of Taiwan.
                    ``(D) A person (including a legal entity) 
                headquartered, organized under the laws of, or having 
                its principal place of business in the People's 
                Republic of China.
                    ``(E) A person at least 15 percent of the 
                outstanding voting interest of which is held directly 
                or indirectly by an entity described in subparagraphs 
                (A)-(D).
                    ``(F) A person at least 25 percent of the 
                outstanding voting interest of which is held directly 
                or indirectly by any combination of persons described 
                in subparagraphs (A)-(E).
            ``(2) Specified interest.--The term `specified interest'--
                    ``(A) means, with respect to a person--
                            ``(i) stock or any other equity or profits 
                        interest of such person,
                            ``(ii) debt issued by such person, and
                            ``(iii) any contract or derivative with 
                        respect to an interest described in clause (i) 
                        or (ii), and
                    ``(B) includes any interest held, directly or 
                indirectly, through--
                            ``(i) a regulated investment company, 
                        exchange traded fund, or other pooled 
                        investment, or
                            ``(ii) any derivative financial instrument 
                        or other contractual arrangement with respect 
                        to such interest (including any financial 
                        instrument or other contract which seeks to 
                        replicate any financial return with respect to 
                        such interest).
            ``(3) People's republic of china.--The term `People's 
        Republic of China' includes Special Administrative Regions, 
        including Hong Kong and Macau, but does not include Taiwan.''.
    (b) Net PRC Securities Gain Subject to Highest Rate of Income 
Tax.--
            (1) Individuals.--Section 1 of such Code is amended by 
        adding at the end the following subsection:
    ``(k) Net PRC Securities Gain Subject to Highest Rate of Income 
Tax.--
            ``(1) In general.--The tax imposed under subsections (a), 
        (b), (c), (d), and (e) shall be increased by the product of--
                    ``(A) the highest rate of tax in effect under such 
                subsection, multiplied by
                    ``(B) the net PRC securities gain of the taxpayer 
                for the taxable year.
            ``(2) Prevention of double taxation.--For purposes of 
        subsections (a), (b), (c), (d) and (e), taxable income 
        (determined without regard to this paragraph) shall be reduced 
        by the net PRC securities gain of the taxpayer for the taxable 
        year.
            ``(3) Net prc securities gain.--For purposes of this 
        subsection, the term `net PRC securities gain' means the excess 
        (if any) of--
                    ``(A) the taxpayer's aggregate gains on the 
                dispositions of disqualified PRC securities for the 
                taxable year, over
                    ``(B) the taxpayer's aggregate losses on the 
                dispositions of disqualified PRC securities for such 
                taxable year.''.
            (2) Corporations.--Section 11(b) of such Code is amended to 
        read as follows:
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) shall be the sum of--
            ``(1) 21 percent of the excess (if any) of--
                    ``(A) taxable income, over
                    ``(B) net PRC securities gain, plus
            ``(2) the product of--
                    ``(A) the highest rate of tax in effect under 
                section 1, multiplied by
                    ``(B) the lesser of taxable income or net PRC 
                securities gain (as defined in section 1(k)(3)).''.
    (c) Clerical Amendment.--The table of sections for part IV of 
subchapter P of chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new item:

``Sec. 1261. Gains from disposition of disqualified PRC securities.''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to dispositions after the date which is 6 months after 
        the date of the enactment of this Act.
            (2) Application to first taxable year.--For purposes of 
        determining net PRC securities gain with respect to any taxable 
        year which includes the date which is 6 months after the date 
        of the enactment of this Act, only dispositions of disqualified 
        PRC securities (as defined in section 1261(b)(1) of the 
        Internal Revenue Code of 1986, as amended by this section) 
        after such date shall be taken into account.
    (e) Election To Pay Tax Liability Attributable to Dispositions Made 
in Anticipation of Increased Tax in Installments.--
            (1) In general.--In the case of any taxpayer which has a 
        net PRC tax liability for any taxable year, such taxpayer may 
        elect to pay such liability in 3 equal installments.
            (2) Date for payment of installments.-- If an election is 
        made under paragraph (1), the first installment shall be paid 
        on the due date (determined without regard to any extension of 
        time for filing the return) for the return of tax for the 
        taxable year referred to in paragraph (1) and each succeeding 
        installment shall be paid on the due date (as so determined) 
        for the return of tax for the taxable year following the 
        taxable year with respect to which the preceding installment 
        was made.
            (3) Acceleration of payment.--If there is an addition to 
        tax for failure to timely pay any installment required under 
        this subsection, a liquidation or sale of substantially all the 
        assets of the taxpayer (including in a title 11 or similar 
        case), a cessation of business by the taxpayer, or any similar 
        circumstance, then the unpaid portion of all remaining 
        installments shall be due on the date of such event (or in the 
        case of a title 11 or similar case, the day before the petition 
        is filed). The preceding sentence shall not apply to the sale 
        of substantially all the assets of a taxpayer to a buyer if 
        such buyer enters into an agreement with the Secretary of the 
        Treasury (or the Secretary's delegate) under which such buyer 
        is liable for the remaining installments due under this 
        subsection in the same manner as if such buyer were the 
        taxpayer.
            (4) Proration of deficiency to installments.--If an 
        election is made under paragraph (1) to pay the net PRC tax 
        liability in installments and a deficiency has been assessed 
        with respect to such liability, the deficiency shall be 
        prorated to the installments payable under paragraph (1). The 
        part of the deficiency so prorated to any installment the date 
        for payment of which has not arrived shall be collected at the 
        same time as, and as a part of, such installment. The part of 
        the deficiency so prorated to any installment the date for 
        payment of which has arrived shall be paid upon notice and 
        demand from the Secretary of the Treasury (or the Secretary's 
        delegate). This subsection shall not apply if the deficiency is 
        due to negligence, to intentional disregard of rules and 
        regulations, or to fraud with intent to evade tax.
            (5) Election.--Any election under paragraph (1) shall be 
        made not later than the due date for the return of tax for the 
        taxable year referred to in paragraph (1) and shall be made in 
        such manner as the Secretary of the Treasury (or the 
        Secretary's delegate) shall provide.
            (6) Net prc tax liability.--For purposes of this 
        subsection--
                    (A) In general.--The term ``net PRC tax liability'' 
                means, with respect to any taxpayer for any taxable 
                year, the excess (if any) of--
                            (i) such taxpayer's net income tax for such 
                        taxable year, over
                            (ii) such taxpayer's net income tax for 
                        such taxable year determined without regard to 
                        any gains or losses from the disposition of 
                        disqualified PRC securities (as defined in 
                        section 1261(b)(1) of the Internal Revenue Code 
                        of 1986, as added by this section) during the 
                        6-month period beginning on the date of the 
                        enactment of this Act.
                    (B) Net income tax.--The term ``net income tax'' 
                means the regular tax liability reduced by the credits 
                allowed under subparts A, B, and D of part IV of 
                subchapter A.
            (7) Installments treated as tax.--For purposes of subtitle 
        F of the Internal Revenue Code of 1986, any installment due 
        under this subsection shall be treated in the same manner as 
        tax except as otherwise provided in this subsection.

SEC. 3. DENIAL OF FOREIGN TAX CREDIT FOR INCOME ATTRIBUTABLE TO 
              DISPOSITION OF DISQUALIFIED PRC SECURITIES.

    (a) In General.--Section 901 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Denial of Foreign Tax Credit With Respect to Income 
Attributable to Disposition of Disqualified PRC Securities.--No credit 
shall be allowed under subsection (a) with respect to any foreign 
income tax on income attributable to gain from the disposition of a 
disqualified PRC security (as defined in section 1261(b)(1)).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to dispositions after the date which is 6 months after the date 
of the enactment of this Act.
                                 <all>
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